So do we have the rule of law or not?

The bank had argued that it was legally required to pay bonuses to bankers for work done during 2008 – in the lead-up to the banking crisis.

However, Allied reconsidered its position following a letter from the Irish finance minister Brian Lenihan.

In November, it lost a case brought by a former banker, John Foy, who had sought a bonus of €160,000 based on his 2008 performance.

A contract is, after all, a contract.

If Allied had actually gone bankrupt, then of course the bankers could join the creditors queue along with everyone else. And lost wages might be privileged above other unsecured creditors or not: depends upon the specific system in Eire.

But given that Allied has not gone bankrupt …..for it hasn\’t, even though it clearly and obviously would without the State support….then those contracts still stand.

Which leads to an uncomfortable situation. The rule of law says that those contracts should be honoured. The baying mob insists that they should not be. And it\’s very difficult indeed not to be at least sympathetic to said mob.

But, in the end, in the long term, the damage done to an economy and a polity by breaking contracts at the say so of the mob (and the mob here can mean anything from the assembled politicians, the NGOs, through to the real mob) is, I would submit, much greater than the € 40 million that Allied looks like it\’s not going to pay out.

11 comments on “So do we have the rule of law or not?

  1. Tim,
    I take your point but the rule of law probably doesn’t oblige the state to bail out a failing financial institution.
    Where a kindly state does so perhaps the normal rules no longer apply to the institution benefitting from the state’s generosity.
    Let’s hope the UK government takes note of what Ireland is doing.

  2. A clear point as always.

    It’s an invitation to those who bonus has been “shelved” not cancelled to ask a court to enforce the terms of that contact.

    Nothing special. Happens every day at Employment Tribunals up and down this country. Bankers are no special case.

  3. tbm,

    The bank bailouts didn’t have to happen. Politicians have pointed the mob in the direction of bankers to stop the mob from holding the politicians to account.

    The reason for the bank bailouts are myriad. Though I get a sense that banks were convinced that they could do what they liked until the regulators say stop and the regulators didn’t say stop. In such circumstances does a Government have an unwritten duty to share some of the burden of the mistakes made under a duff regulatory system? Maybe, maybe not. But any financial burden is never going to be picked up by the Government they’ll just pass it on to taxpayers.

  4. As a citizen of the state in question, I’d agree with Tim except for one ..ahem.. small point: all the individuals in question should have been made redundant. Their old employer has in effect ceased to exist.
    They’d be unemployed and without nice redundancy payoff if it were not for the state having taken over the banks. They should be given the state’s contribution to a redundancy payoff and invited to reapply at much reduced salary for whatever few of their old jobs can still be justified today.

    This keeps the sanctity of contracts in line with the sanity of this taxpayer!

  5. A sensible good bank/bad bank solution would have avoided all this nonsense by incorporating Paul’s suggestion: da bums would have got the bum’s rush.

  6. A contract is a contract and a liability is a liability. Absent legislation allowing liability to be disclaimed, it must be shown in the accounts.

  7. Tim,

    As a former solicitor, one can only say ‘Fuck all contracts’.

    In the United Kingdom, and everywhere the British have laid their spoor, contracts are believed to be more sacred than human life. This is an abortion of a philosophy which has permitted and which continues to permit all manner of evils to be permitted in the name of ‘sanctity of contract’.

    Enough is enough. Send the gobshites packing down O’ Connell Street with a kick up their fat arses.

  8. The thing is, nobody needs to break any contracts at all.

    The Irish government can, completely legitimately and without breaking any contracts, say “all bank bonus income will be taxed at 100%” for the next six months, instruct the banks that it owns to pay the contractually obliged bonuses, and then immediately collect all the money back in tax.

    Bish bash bosh; no laws broken; problem solved.

  9. The Government could also have required the banks to get all bonusees to sign a waiver renouncing their right to the bonus as prerequisite to the bail out.

    In any event, the enforcement of private contracts is a favour granted by the government, not a fundamental right. What the government giveth, the government may taketh away.

  10. There’s another law, passed during WWII and not repealed, that says that economic sabotage is treason. The government could invoke this law and execute many bankers. That’d teach them some manners!

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